An IVA may not be suitable in all circumstances.

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What Happens if an IVA Fails?

When an IVA fails, there are several things which can happen. However, the IVA usually doesn’t fail straight away. Here’s what to expect and how to ensure that your IVA doesn’t fail.

If an IVA fails

Your IVA is a legal agreement, not only do your creditors have to stick to the rules but you do too. Therefore, if you don’t meet your payments or other obligations listed in your IVA it could fail. However, it’s important to note that we assess your eligibility for an IVA and make sure that the repayments are affordable for you before you begin.

Making Sure your IVA doesn’t Fail

Many people find that IVAs work well for them – an IVA can allow you to get your debt payments under control and you could write off up to 79.8%* of your unsecured debts. One of the advantages of an IVA is that it is a formal debt solution which means that once agreed, your creditors have to stick to the agreement. However it also means that you must stick to the terms and repay the agreed amounts on time so that your IVA doesn’t fail.

* Based on FSS customers who had an IVA approved between January 2022 and Feb 2024, the top 51% expect to write off on average 79.8% of their unsecured debt upon successful completion.The top 10% expect to write off on average 88.4% of their unsecured debt upon successful completion.

What happens if an IVA fails?

Although the idea of an IVA failing is a scary one, making sure that you can afford payments, paying the agreed amounts on time and sticking to the terms of the IVA will help ensure that it doesn’t fail.

Illustration of two people shaking hands and a scale

If you’ve signed up for an IVA, it’s really important to keep up with your payments and other obligations under its terms. As an IVA is a legal agreement, your creditors have to commit to the terms. This also means you have your obligations to fulfil. Below are some of the situations which can cause an IVA to fall into breach, which if not remedied can lead to the IVA failing.

What happens if I breach my IVA?

In the first instance, breaking the terms of your IVA will lead to a breach notice. This formal letter advises you of how you’ve broken the terms of the IVA and what you can do to get back on track. There are several reasons breach notices are issued, including:

  • Missed payments – Usually if you miss the equivalent of three months payments to your IVA it will be a breach of the terms;
  • Failing to meet the reasonable requests of your IVA Supervisor – For example, if you don’t go ahead and sell an asset after originally agreeing you would do so;
  • Not paying any extra amounts which are required should your earnings increase;
  • Failing to pay additional income to the IVA;
  • Taking out credit of £500 or more without getting prior permission from the IVA Supervisor. This typically includes loans from friends or family members;
  • Failing to provide the details required for your annual IVA review;
  • Failing to declare any additional windfall income to your IVA Supervisor, including compensation, inheritances, or lottery wins.

If you’re already in an IVA and you’ve received a breach notice, please contact us so that we can help you with this and discuss the options which are available. The sooner you speak with us after receiving a breach the more likely it is we can help you. If you’re still weighing up whether an IVA is right for you or if you think your IVA is likely to fail, our advisors are on hand to give no-obligation consultations based on your personal circumstances – we only put forward IVAs where we believe they are likely to be successful.

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What happens if I receive an IVA breach notification?

Fortunately, receiving an IVA breach notice shouldn’t be the end of the world. There are lots of ways you can deal with this so it’s important to get in touch with your Supervisor at the earliest opportunity to discuss the breach and put forward your proposal to remedy the situation. Ignoring your breach notification is definitely not the way forward.

An IVA document ripped apart

Even if your circumstances have changed and your earnings have decreased, your Supervisor can ask the creditors to agree to a variation to the IVA terms and accept lower payments than originally agreed, but this will be up to your creditors to decide whether the changes are acceptable. If you receive a breach notice it will detail any problems and provide information about how you can get back on track. Failing to successfully deal with the breach will mean your Supervisor may need to set up a meeting of creditors to discuss how they wish to proceed. Ultimately, this could lead to them terminating the IVA.

Most people fall into breach due to worsening circumstances, so getting in touch with your Supervisor at the very earliest opportunity is one way you can actually avoid breach notices. Any change to your situation may need to be mentioned. This is particularly the case if you cannot meet your contractual payments. However, if your creditors refuse to accept the revised lower payments, it could mean that your IVA fails.

What are the consequences of failing an IVA?

A gavel and sound block

If your IVA fails, both you and creditors will no longer be bound by its terms and you will no longer have the legal protection of the IVA. You will become directly responsible for repayment of the debts which were included in the IVA. Your creditors can add any interest or charges that would have been applied to the debt from the date the IVA was approved, which may increase the amount owed. To recover the sums owed to them, your creditors may decide to pursue legal action against you. It’s also possible that your creditors could request your appointed Insolvency Practitioner presents a petition for your bankruptcy if funds are held in the IVA.